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Lottery tickets for sale in November 2014 at Cedar Market in Atlantic City, N.J.(Photo: Thomas P. Costello, Asbury Park (N.J.) Press)
TRENTON, N.J. — The New Jersey Lottery is suffering from jackpot fatigue, but the entire state budget is feeling run down.
States with jackpot fatigue need increasingly bigger jackpots to lure in casual players who buy lottery tickets only when a prize is huge.
People once impressed with a $100 million payout shrug until it reaches $300 million. Then fewer people play, so it takes longer to get to staggering prizes.
Sales of Mega Millions and Powerball multistate games were down 30% through the end of March, New Jersey officials said. At that pace, sales of those games, which have accounted for around 15% of all New Jersey Lottery sales in recent years, would drop by $130 million this fiscal year.
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"It appears to be a national phenomenon," said David Rosen, the Legislature's budget officer. "Maybe it's gambling fatigue."
Total lottery sales in 18 states and the District of Columbia — led by a more than 15% decline in Texas — decreased in fiscal 2014 compared with fiscal 2013, according to the North American Association of State and Provincial Lotteries, a trade group that represents 52 lotteries across the USA and Canada. Fiscal years in all but four states — Alabama, Michigan, New York and Texas — end June 30.
“It appears to be a national phenomenon. Maybe it's gambling fatigue. ”
David Rosen, New Jersey Office of Legislative Services
D.C. and 21 states transferred less money into budget coffers in the same period, according to association figures. New Jersey transferred exactly the same amount as the year before because the lottery took $8 million out of its surplus, pushing its balance below $1 million for the first time since at least 1980.
Revenue from the lottery for New Jersey's state budget last year, $965 million, missed its target by $55 million and would have missed by more without the infusion from the lottery's surplus account.
Northstar New Jersey, a private company, took control of the lottery's sales and marketing in October 2013, three months into the state's 2014 fiscal year, under a contract that runs through 2029.
Things aren't going so well this year, either. Sales are up, but growth is slowing.
Northstar's contract sets a target for state revenue of $1.047 billion. The original state budget adopted in June 2014 counted on $1.037 billion. In February, that was lowered by $82 million.
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Last week, it was trimmed by an additional $25 million. It's now at $930 million.
But without the Northstar contract, New Jersey would be in a worse position, state Treasurer Andrew Sidamon-Eristoff said.
While scratch-off games have their following, the big-money Powerball and Mega Millions multi-state games combat lottery fatigue.<span style="color: Red;">*</span>(Photo: Bob Bielk, Asbury Park (N.J.) Press)
About 800 more locations sell lottery tickets than in October 2013, an increase of almost 12% that has yielded $165 million in additional sales. Northstar spent $30 million on technology upgrades, including better vending machines and systems that change the way claims are paid and retailers manage instant games, he said.
"I believe frankly that we are better positioned to withstand the negative impact of that trend than other states that don't have the similar kind of management contract in place," Sidamon-Eristoff said in testimony to the Legislature.
Northstar's contract requires it to reach agreed-upon financial targets. It owed the state $14 million for falling short of its promises in its first nine months, which Northstar covered by using part of a $20 million credit established when it paid the state $120 million upon getting its contract. This year's shortfall could trigger a payment to the state from Northstar of around $18 million, which would exceed the roughly $6 million credit it has left.
"The contract contains important performance standards and financial guarantees," Sidamon-Eristoff said. "We will not hesitate to exercise the state's contractual rights as appropriate to protect the long-term interests of our taxpayers and residents."
Northstar would have been dinged more except the state lowered the target, citing the economic effects of Hurricane Sandy that struck a year before the contract began. That explanation shifted a bit in written testimony to the Legislature from the Treasury Department, which pinned last year's drop in sales on the overall economy, harsh winter and jackpot fatigue.
Despite that oft-mentioned fatigue, New Jersey Gov. Chris Christie's administration's latest financial plan is still forecasting growth of 7.5%, from $930 million now to $1 billion for the 2016 budget. That has some Democratic lawmakers shaking their heads.
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"I wish I were always so fatigued," said Assemblyman Gary Schaer, a Democrat from Passaic, N.J.
Sales of in-state games, such as scratch-off tickets, are up 10%, Sidamon-Eristoff said. The CASH4LIFE game that New Jersey and New York launched expanded this spring to Pennsylvania and Virginia.
A new instant draw game is due to start in August. Finally, he said the huge jackpots will return, either by chance or through a rules change generating even bigger prizes.
"There's a generation that went to the local convenience store, picked up their newspaper, picked up their cup of coffee and picked up their lottery tickets and went off to work," said state Sen. Paul Sarlo, a Democrat from Bergen, N.J. "The younger generations don't do that anymore."
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